PROJECTState and Local Backgrounders


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  • Health and Hospital Expenditures

    State and Local Backgrounders Homepage

    Spending on health and hospitals includes spending on community and public health programs, government-owned hospitals, and government payments to privately owned hospitals.1 

    Census counts most Medicaid spending as public welfare, but it includes some Medicaid spending under the health and hospital expenditure category.

    How much do state and local governments spend on health and hospitals?

    In 2019, state and local governments spent $322 billion on health and hospitals, or 10 percent of direct general spending.2 As a share of direct general state and local spending, health and hospitals combined were the third-largest expenditure in 2019 and roughly equal to higher education expenditures.

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    In 2019, 65 percent of health and hospital spending went to hospital services and 35 percent went to other health programs.

    Hospital services include the operation of university medical schools, state-owned hospitals for people with mental illness or disabilities, public children’s hospitals, and payments to private hospitals for public services. Payments to providers under public welfare programs, such as Medicaid, are counted separately under public welfare expenditures. The Medicaid and CHIP Payment Access Commission estimates that payments to hospitals account for 13 percent of total Medicaid spending.

    Health program expenditures include services such as mental health and substance abuse programs, county health department inspections, water and air quality regulation, and health inspections.

    In 2019, 96 percent of health and hospital expenditures were for operational costs, such as public health administration, community health programs, public hospital operations, and regulatory services. The remaining 4 percent went to capital outlays such as hospital construction.

    How does state spending differ from local spending and what does the federal government contribute?

    Spending on health and hospitals is split roughly evenly between state and local governments. In 2019, states provided 45 percent of health and hospital spending while local governments provided 55 percent.

    State and local governments also spend roughly the same share of their budgets directly on health and hospitals. In 2019, 9 percent of state direct spending went to health and hospitals versus 10 percent of local direct spending. Among levels of local governments in 2017 (the most recent year that we have data for these levels of government), spending on health and hospitals accounted for the largest share of county budgets (20 percent) and special district budgets (36 percent). Special districts are typically dedicated to one or a few services, so the relatively high percentage of national special district spending on health and hospitals reflects that a large number of special districts across the country are dedicated specifically to health and hospital services (mostly the latter).

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    However, states vary considerably in their distribution of state and local direct health and hospital spending. In Indiana, for example, only 14 percent of direct health and hospital spending occurred at the state level in 2019. In contrast, in Vermont the state was responsible for 98 percent of direct health and hospital spending.

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    Overall, 91 percent of total health and hospital spending ($291 billion) was funded by state and local governments in 2019. The remaining 9 percent ($30 billion) was funded by federal grants to state and local governments.

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    However, given the decline in state and local tax revenue resulting from the COVID-19 pandemic, and the large amount of federal transfers for health-related expenditures approved by Congress in both the CARES Act and the American Rescue Plan, these numbers will probably look different for fiscal years 2020 and 2021. It will be a few years until Census publishes that data, though.

    How much do hospital charges contribute to health and hospital spending?

    The Census data on health and hospital expenditures include revenue from both governments and charges related to health and hospitals, such as when a public hospital charges patients, private insurance companies, and public insurance programs (such as Medicare) for care or other services (e.g., a cafeteria) plus services such as the care and treatment of the handicapped.

    The share of state and local health and hospital spending from charges has grown considerably over the past 40-plus years. In 1977, charges accounted for 37 percent of state and local health and hospital expenditures. But since 2011, charges have accounted for a majority of this spending. Charges were 57 percent of state and local health and hospital expenditures in 2019.

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    How has health and hospital spending changed over time?

    In 2019 inflation-adjusted dollars, state and local government spending on health and hospitals increased from $97 billion in 1977 to $321 billion in 2019, for an increase of 231 percent. Not coincidentally, public welfare had the fasted growth (411 percent) from 1977 to 2019, as much of its growth was driven by higher Medicaid spending. Medicaid spending, which Census counts as either public welfare or health and hospital spending, grew mostly because of increased federal spending on the program, rising health care costs, and more Americans receiving health insurance through the program. (For more information on spending growth see our state and local expenditures page.)

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    Much of this spending increase was driven by the rising costs of health care and the related increase in charges as a share of state and local spending on health and hospitals. Notably, the growth in health and hospital expenditures roughly tracked the growth for non-health and hospital expenditures until 2006, but since then the former has seen far more spending growth than the latter.

    However, despite the spending growth, health and hospital spending as a share of state and local direct general expenditures has not changed significantly over the period. In 1977, 8 percent of state and local spending went to health and hospitals compared with 10 percent in 2019.

    How and why does spending differ across states?

    Across the US, state and local governments spent $980 per capita on health and hospitals in 2019. Wyoming spent the most on health and hospitals at $2,971 per capita, followed by South Carolina ($1,727), Kansas ($1,558), Mississippi ($1,546), and California ($1,536). New Hampshire spent the least per capita at $174, followed by Arizona ($224), Rhode Island ($312), North Dakota ($349), and South Dakota ($358).

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    Data: View and download each state's per capita spending by spending category

    Health and hospital spending may vary by state for many reasons, including higher utilization of health services or hospital readmission rates among some populations; higher regional health care costs; the number of government-owned hospital beds; or other factors that may require additional investment in public health services to address, such as pollution or mental health and substance abuse problems.

     

    Interactive Data Tools

    State and Local Finance Data: Exploring the Census of Governments

    State Fiscal Briefs

    What everyone should know about their state’s budget

    Further Reading

    Health of the States: How U.S. States Compare in Health Status and the Factors that Shape Health

    Steven H. Woolf, Laudan Y. Aron, Derek Chapman, Lisa Dubay, Emily Zimmerman, Lauren C. Snellings, Lindsey Hall, Amber D. Haley, Nikhil Holla, Christopher Lowenstein, and Timothy A. Waidmann (2016)

    Assessing Fiscal Capacities of States: A Representative Revenue System–Representative Expenditure System Approach, Fiscal Year 2012

    Tracy Gordon, Richard Auxier, and John Iselin (2016)

     

    Notes
    1 Data are from census expenditure categories E32, E36, F32, F36, G32, G36, K32, and K36.

    2 Direct general spending refers to all direct spending (or spending excluding transfers to other governments) except spending specially enumerated as utility, liquor store, employee-retirement, or insurance trust. Unless otherwise noted, all data are from the US Census Bureau Annual Survey of State and Local Government Finances, 1977-2018 (compiled by the Urban Institute via State and Local Finance Data: Exploring the Census of Governments; accessed 28-May-2021 04:33), https://state-local-finance-data.taxpolicycenter.org. The census recognizes five types of local government in addition to state government: counties, municipalities, townships, special districts (e.g., a water and sewer authority), and school districts. All dates in sections about expenditures reference the fiscal year unless explicitly stated otherwise.

    Research Areas State and local finance
    Policy Centers Urban-Brookings Tax Policy Center